State legislature to overhaul Medicaid

Published: Sunday, March 24, 2013 at 6:01 a.m.

Last Modified: Sunday, March 24, 2013 at 11:48 p.m.

MONTGOMERY — The Alabama State Legislature is set to begin work on an overhaul bill that will change Medicaid to a managed care plan by 2017.

The plan that will be introduced to House and Senate committees is the result of a 14-month effort by the 33-member Alabama Medicaid Advisory Commission formed by Gov. Robert Bentley in late 2012.

The effort represents a major restructuring of how Medicaid works. Presently, Medicaid is administered by the state and is a not-for-profit entity. The managed care option offered by the commission would turn over delivery of health care to for-profit companies. Those companies would operate in up to eight regions of the state. Those regions would be determined by an actuary.

The Alabama Medicaid Agency now pays a provider a set amount for each service rendered, also called “fee-for-service.” The state is looking to provide a new structure that will allow for a predetermined amount of money per patient annually to be paid to a “regional care organization” that will then provide and pay for all Medicaid services.

The regional care organization or an alternative provider would be the administrator in charge of delivering health care within a region. The state agency would pay the administering agency between $300 million and $500 million per year to care for all of the Medicaid patients’ needs in their region. If they can do that and have money left over, they would make a profit. The government hopes profits would provide incentive to keep the population healthier.

Alabama Medicaid’s annual appropriation from the General Fund budget exceeds $600 million, and needs continue to grow. It gets the bulk of its money from other sources, including the federal government, and is a $6 billion a year program.

Jim Carnes of Alabama Arise, a citizens’ advocacy group for the poor, explained that “Medicaid is the backbone of the health system we depend on in Alabama. Medicaid sustains hospitals in rural areas, children’s hospitals and without Medicaid payments, they would close.” More than 11 percent of Alabama’s workforce has a job in the health care industry. Carnes was a member of the advocacy commission.

The committee asserts in its report that the key to better health care and lower Medicaid costs is preventative services. With children comprising more than half of Medicaid consumers, the new model would reward providers by keeping them healthy until they outgrow the system.

If the regional care organization is unable to improve the health of its members through preventive services, provide more effective health care delivery and meet other requirements, the State Medicaid Agency would be able to replace them.

One area where supporters of the new plan hope achieve significant cost savings is in fewer emergency room visits. It is not unusual for a child with asthma to visit the emergency room for a breathing treatment that could have been prevented by timely trips to a doctor’s office. Substituting high tech trauma room care for routine doctor’s visits cost taxpayers millions in budget dollars annually.

Kentucky’s experience with a managed care company contracted to provide Medicaid services offered a lesson to Alabama. That company didn’t see enough profit and left the state and its patients in limbo.

The reorganization plan under consideration attempts to put steps in place to insulate taxpayers against the substantial financial risk that Kentucky faced. The bill requires any company wanting to be a regional care organization to put $2.5 million in escrow and have other reserves that would be ceded to the state agency if they stop doing business.

Those requirements may set the financial bar too high for local consortiums considering being the provider for a region. If no RCO comes forward, commercial management care companies, referred to in the legislation as “alternative providers,” will be tapped by the Medicaid agency to run the region’s health care.

The language of the bill allows an organization that’s public, private or a combination thereof to be selected as the Medicaid administrator for each region.

Some were skeptical of the for-profit approach for Alabama. Meridian Health Plan, a physician-owned Medicaid HMO operating in five states, advised the commission that managed care “is not a winning proposition for Alabama at this time.” The organization examined financial margins to see if money could be made and concluded that only the pharmacy sector would realize savings if managed care is implemented.

“The margins in Alabama are very, very thin and some companies will feel they cannot make money here,” said Sen. Greg Reed in discussing the Senate version of the bill he’s sponsoring. “The bill allows for people in the regions to come together to be the regional care organization. Perhaps doctors and others would want to become the corporate entities in their regions because they are most familiar with their own patients and their needs.”

“The whole idea is for us to make a framework that is flexible, that allows the Medicaid Agency to make health care delivery systems that are effective and efficient,” he continued.

When Gov. Bentley, who is also a physician, announced the bill, he recalled that nearly 50 percent of his Medicaid patients would miss appointments, many due to lack of transportation. He hopes the final bill will address that problem.

Under the proposal, all recipients would be moved to the managed care platform by 2017.

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